Enjoy Manufacturing Month, Then Plan Carefully for 2021September 28, 2020
October 2, 2020, marked perhaps the most unusual Manufacturing Day ever, since this day typically is highlighted by plant tours around the country. Metal formers, metal fabricators and other manufacturing companies, and educational institutions typically open their doors to students, parents and teachers. Their aim: to place modern manufacturing careers on a pedestal and support industry efforts to fill the expected 4 million-plus skilled and high-paying manufacturing job vacancies expected to arise over the next decade.
This time, while in-person events related to MFG Day have been put on hold, dozens of manufacturers are finding ways to reach the next generation of skilled workers—through digital and virtual events. Kudos to them, including several PMA member companies.
The diverse initiatives of MFG Day, and through initiatives spanning the entire month of October, “support women, veterans, students and workers through skills-training programs and community building,” as noted on the website of The Manufacturing Institute, the workforce-development and education partner of the National Association of Manufacturers.
As the economy continues to recover in the wake of COVID-19, our industry’s skills shortage and its ramifications will again become apparent. And the outlook for the remainder of 2020 and for the early part of next year looks promising, as 66 percent of manufacturers project positive business developments, per a NAM Outlook Survey completed in September. Similarly, the August survey of PMA members finds that only 17 percent anticipate a decline in activity (a decrease from 23 percent in July), and 55 percent expect an increase in orders compared to three months ago (an increase from 52 percent in July).
Other data collected by the NAM survey: Employee wages are expected to increase by 1.4 percent during the next 12 months, and capital investments are expected to grow by 0.7 percent during the same period (only 22 percent of respondents forecast reduced capital expenditures).
That said, fall begins the 2021 budgeting season for many manufacturers, and as noted in a September blog post by McKinsey & Company, “the financial-planning process for 2021 presents an opportunity to turn hard-earned lessons from the COVID-19 pandemic into an enduring exercise in linking strategy to value.” The business-as-usual budgeting process no longer suffices, as nearly half of those surveyed by McKinsey & Company cite the need to streamline their overall budgeting processes to react more quickly and efficiently, and 65 percent anticipate more use of rolling forecasts.
Specifically, McKinsey & Company recommends these five steps that CFOs should consider taking when budgeting for 2021:
- Develop stress-test scenarios and assumptions to counter uncertainty.
- Reimagine the business from a zero base to determine key business drivers.
- Hold back some spending centrally—as contingent resources—to build flexibility and optionality into budgets.
- Assign finance talent to the highest-priority areas or topics to prevent burnout.
- Rethink decision making to speed up and debias processes.